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Detroit wants to be the first big American city to tax land value

economist.com

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Re: Detroit wants to be the first big American city to tax land value

#341

Post by LapsangGuzzler »

ab_goat wrote: post #258
chrisweekly wrote: post #179

Earlier quoted context omitted.

I'm a homeowner in MA interested to hear more.

I come from Western Massachusetts, which is characterized by smaller populations and lower budgetary allocations. The most significant budget item in most municipalities here is education, followed by road maintenance, which is often extremely costly. In Massachusetts, the basic cost estimate for repaving a standard road is approximately $1 million per mile, and this investment typically only lasts about a decade bef…

The Strong Towns YouTube channel makes many similar points. Suburban construction in the US is terribly inefficient and wasteful in the long run by maximizing the convenience auto accessibility at the expense of everything else. If infrastructure had a technical debt equivalent, it would be suburban planning.

Re: Detroit wants to be the first big American city to tax land value

#342

Post by lmm »

jonhohle wrote: post #110
koolba wrote: post #51

Earlier quoted context omitted.

> Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue. Ah more carve outs for boomers. I knew it had to be in there somewhere .

My grandmother (greatest generation) built her house in the 50s and lives on a fixed income. Should she be forced to sell (assuming she couldn’t afford LVT) for an investment she took all the risk to develop? We’re so addicted to spending that anything that leads to generational wealth is fair game for governments to loot?

> My grandmother (greatest generation) built her house in the 50s

I'd love to build my own house, but it's practically impossible for my generation because of the policies those older generations have voted for.

> and lives on a fixed income. Should she be forced to sell (assuming she couldn’t afford LVT)

Yes. There aren't enough places for the rest of us to live, at least not anywhere where there's work, so those of us who are doing something productive (i.e. not lucky enough to be paid a "fixed income" out of other people's taxes) should get priority. If the older generation doesn't like it, they should make it legal to build more housing so that there's enough for everyone.

> for an investment she took all the risk to develop?

Part of the point of LVT is that it mitigates the risk. If the place where she built it becomes popular, she doesn't just get to trouser all the gains. But if the place where she built it becomes unpopular, her taxes drop.

Re: Detroit wants to be the first big American city to tax land value

#343

Post by jackson1442 »

phkahler wrote: post #151
myself248 wrote: post #22

Earlier quoted context omitted.

40% of all land parcels in downtown are _parking lots_. Tell me more about how nobody's hoarding land.

Have you tried to park downtown? If you want fewer lots it's gonna need structures.

This is exactly what LVT is supposed to incentivize.

Re: Detroit wants to be the first big American city to tax land value

#344

Post by lbarrow »

eru wrote: post #331
lbarrow wrote: post #288

Earlier quoted context omitted.

And right now they can afford to wait forever! But with an LVT they have a big incentive to either develop it immediately or sell to someone else who will. It's no coincidence that people who support LVTs are typically YIMBYs -- we want to reform urban planning and land use to make it easier to build things.

> But with an LVT they have a big incentive to either develop it immediately or sell to someone else who will. An LVT gives no such incentives. LVT is explicitly agnostic about how the land is being used. You pay the same, no matter how the land is being used. That's why it's economically efficient. However, a conventional property tax (and also income tax and capital gains tax etc) disincentivise developing. An LVT…

I think you might be missing the context. The scenario we're discussing is a parking lot surrounded by skyscrapers in the middle of a major city. Under a property tax regime, the owner pays little taxes because the structures on the lot are not valuable. Under an LVT, the owner pays the same (high) taxes as the skyscrapers next to it, which would be obvious uneconomical.

So under property taxes, the parking lot owner can afford to wait and have the lot sit empty; under an LVT, they have an incentive to develop.

Re: Detroit wants to be the first big American city to tax land value

#345

Post by epistasis »

brianwawok wrote: post #206
lbarrow wrote: post #145

Earlier quoted context omitted.

Yes, that's exactly the idea. We have a problem in the US where many metro areas do not have enough housing, in part because building big things is penalized by the tax code. By changing the tax code to not penalize construction, we hope to get more construction.

Detroit still has more houses than people wanting to live there.

This is a great situation in which to use an LVT.

Shifting the tax burden from homeowners and productive businesses onto idle land holders means that those that drive the community will penalize investment less and use limited resources in more effective ways.

Efficiency helps the wealthy, but it can help those with less even more, as it matters more.

Re: Detroit wants to be the first big American city to tax land value

#346

Post by LapsangGuzzler »

bitshiftfaced wrote: post #171
rconti wrote: post #5

Earlier quoted context omitted.

Fascinating. First I've heard of this. I can see the obvious advantages, though I'm sure there are disadvantages I'm missing.

The main disadvantage I see is that, despite being able to absorb all tax requirements, politicians and voters wouldn't be able to resist tacking on other types of taxes on top of it.

Voters ultimately have to pay those taxes and politicians want to get reelected, so there’s a definite check there.

Re: Detroit wants to be the first big American city to tax land value

#347

Post by LVTfan »

dllthomas wrote: post #47
slashdev wrote: post #13

Earlier quoted context omitted.

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

One concern I have is that once an area is built up, it's not clear that there will ever be transactions of unimproved land in the area, so I don't know how we keep "unimproved value" from being anything but a fiction.

As housing fads change, some styles will go out of favor. Great rooms replace lots of small rooms.

Technology changes, too, will make some houses obsolete; older roof technology, plumbing, HVAC, inefficient systems, too little insulation and no space for more.

Houses that are obsolete for their location will sell as teardowns. In that situation, the land value is measured by the selling price plus the cost of removing the old house from the site. Assessors can work with those figures very well. Connect the dots from one to the next to the next, and the land value map shapes up.

Re: Detroit wants to be the first big American city to tax land value

#348

Post by avar »

eru wrote: post #300
bitshiftfaced wrote: post #190

Earlier quoted context omitted.

I don't love this idea, and I suspect many others wouldn't either. If you raised your family in a house and have lived there for decades, it has intangible value to you, but not others. Yet because of this value, you must pay potentially much much more than your neighbor, who objectively speaking may have a lot of equal value. What's more, even if you pay more than you ought to, you'll never feel secure in your home,…

> What's more, even if you pay more than you ought to, you'll never feel secure in your home, knowing that at any time you may be forced to sell. That can already happen right now with conventional property taxes..

Indeed, and the mechanism for adjusting any unfairness in assessment you encounter there is always going to be more byzantine than a fair self-assessment, and probably impossible in practice.

E.g. let's say you live in a neighborhood where everyone's paying a premium for fanatic views. Except your house is the only one that doesn't have that view.

Even in such an obviously unfair scenario the government is likely to stick to some assessment that's going to be unfair, e.g. some mean sale value of the N lots adjacent to yours.

Re: Detroit wants to be the first big American city to tax land value

#349

Post by __MatrixMan__ »

dheera wrote: post #217
friend_and_foe wrote: post #205

Oh man, I was hoping that this would be one of those things where they tax land to encourage new building, but it's just another city hurting for revenue looking to squeeze it's population a little more. Not that it won't spur development. It will. But not as much as anyone hopes. They have to eliminate taxes on all improvements to the land and tax the land itself only. Also remove code and zoning restrictions on it.…

Yep, if I own something I'd better own it. I shouldn't have to pay rent for owning land, or pay rent for owning a house. I'll just keep renting, I guess, since it makes no difference.

How has property managed to get you to defend such an extreme version of it without also tempting you with a slice of the pie?

This is like saying:

> Harry Potter is the best story ever written and I have no interest in ever reading it.

Property rights are made of consensus, so I'd recommend you stop consenting to the short end of the stick.

Re: Detroit wants to be the first big American city to tax land value

#350

Post by eru »

injeolmi_love wrote: post #113
slashdev wrote: post #13

Earlier quoted context omitted.

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

Whenever something is taxed, less of it is produced. In the case of LVT, the tax is on land that is in a desirable location with lots of nearby amenities. LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. LVT means less walkable cities and more LA style sprawl.

If you are a prospective shop owner deciding where you want to locate your shop, LVT makes no difference at all. If you move to an agglomeration to make it bigger, you might raise other people's LVT slightly. 'Tragedy of the Commons' style.

Perhaps if all the shop owners got together as a cartel they would face the incentives you talk about. But not for individual owners.

Also, LVT does not change the total yearly cost of some land. It obviously doesn't change rents; and even for land owners it doesn't change the recurring costs: the sum of cost of capital for the value of the land plus all taxes is the same with LVT or without. (Basically, the market will prince the LVT burden into market prices of land. Imagine a city where some plots of land have to pay LVT and some don't: the total cost of ownership for comparable plots would be the same independent of whether they are LVT plots or not. Same for renting plots.)

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